Aussie miners will "hurt the most" from US competition

Australian Mining 30 August, 2012 Andrew Duffy

Australian miners will be "hurt the most" as companies in the United States start exporting more coal to China, say Bank of America analysts.

Business Insider reports falling natural gas prices in the US have most companies turning away from coal-fired power, forcing miners to search for an overseas market for their product.

According to Bank of America US producers have already started stealing market share from Australian miners, particularly in China, and this trend is set to continue.

"With US coal exports rising and grabbing share of China’s imports, Australia stands to get hurt the most, being the second-largest coal exporter to China (after Indonesia), in our view," they said.

"China’s coal imports from Australia dropped 2mn tons in June over May, while its imports from the US surged 1mn tons – signs of an early substitution effect that could impact demand for Australian coal, in our view."

Analysts also said rising competition from the US could lead to mining projects in Australia shutting down.

"...It is interesting to note that the substitution effect does not seem to have gained the attention of Australian mining companies yet," they said.

"If so, the damaging effect can potentially lead to large delays/cancellation of coal mining projects in Australia due to price pressure and excessive supply, in our view."

Earlier this week BHP Billiton CEO Marius Kloppers told journalists most coal producers in Queensland were struggling with tough market conditions and there was a "broad industry movement" toward reducing staff numbers and delaying projects.

Know why this is so? While Aussie labour is lima diez, US labour is pito singko lang. Not competitive due to high cost of labour. Gotta import cheap foreign labour (like Pinoy labour) to be competitive.

One reason chose Aus was because exchange rate was US$1.20 = Aus$1. Could send home more money. 3 yrs later, nosedived to US$0.57, 'coz of the opening of the iron mine in Brazil which has hi-grade iron ore deposit enough to supply earth for 500yrs. Competiting Aus, the biggest exporter of iron ore to Russia, China, and rest of Asia.
Also, a technological breakthrough in farming lead to surplus in USA. Rather than burn their surplus wheat, etc and slaughter their cows, etc, Uncle Sam subsidized farming in the form of reduced tariff. Leading to a drop in price. Again, competiting Aus, the largest exporter of these products to Russia, China, etc.
Has never recovered. But now, creeping up. Current rate is US$1.00+. One advantage of living in Aus is its resilient ability. Yet another reason for sheilas to choose Aus instead of USA. Hehehe.

Can still remember the then PM Bob Hawke’s comment, “You, Americans, are hypocrites. Call us your friends. Then, stealing our market from us”. Hehehe. Will history repeat itself again?